China's decision to raise lending rates by a smaller amount than deposit rates indicated the authorities are cautious not to over-tighten the economy amid uncertainty surrounding the global economic growth and financial markets, economists say. "The fact that they only raised the one-year lending rates by 18 basis points suggests that it is not a very aggressive change in policy," said Peter Morgan, chief Asia-Pacific economist at Hongkong and Shanghai Banking Corp. "It seems like that they are still focusing more on quantitative tightening measures like increasing reserve requirement ratio, which are less effective than raising interest rates [in tightening the economy]." On Thursday, the People's Bank of China raised the one-year lending rate by 18 basis points to 7.47 percent and the one-year savings rate by 27 basis points, along with other rate hikes in various degrees. Earlier this month, China' top leaders said they would shift from "prudent" to "tighter" monetary policies next year to prevent economic overheating and suppress inflation, which had raised hopes that Beijing will intensify its tightening efforts. "The modest increase in lending rates suggests a limited scope to use interest rates to cool down the economy, as PBOC clearly does not want to over- tighten and make borrowers suffer," wrote JPMorgan analysts in a research note. Goldman Sachs and Lehman Brothers said they are not expecting further interest
The Chinese government will restrict total lending of commercial banks to grow not more than 15 percent next year. Banks should also make loans according to quarterly targets, a mainland newspaper reported yesterday. A limit for the total amount of loans to be made in one year will be determined by government authorities, while individual banks will be allocated quarterly quotas. The news came after the central bank raised interest rates for the sixth time this year on Thursday. Shanghai Securities News quoted a source as saying 35 percent of the yearly lending quota can be used in the first quarter, 30 percent in the second, 25 percent in the third and 10 percent in the fourth. Commercial banks in the mainland made about half of their loans in the first quarter this year, and banks need to reduce lending by 15 percent to meet the 35 percent ceiling in the same period next year. "Under the yearly loan quota, [banks] need to state clearly the proportion of loans made in each quarter," said a source involved with bank management, adding that government authorities had already required banks to finish next year's lending timetable.
Analysts expect the Hang Seng Index to end the year above the 28,000 level as it takes its cue from the stabilizing US market. "The market should remain strong mainly because of more favorable overseas markets. There will also be more window-dressing activities by fund managers as we near the end of the year," said Ben Kwong Man-bun, chief operating officer of KGI Asia. On Friday, the Hang Seng Index climbed 609.83 points or 2.3 percent to close at 27,626.92, led by property plays, on a thin trading volume of HK$83.4 billion. Kwong said trading volume will remain weak ahead of the holidays. "We have a long holiday coming up, so market activity will be ... dominated by window dressing," Kwong added.
The Hong Kong market will be open for the morning session only today, before closing for two days over the Christmas holidays. New Year's Eve next Monday will also be a half day. First Shanghai Securities strategist Linus Yip Sheung-chi said a rally in Wall Street on Friday showed that the US market has stabilized for now - a relief for investors. US stocks surged after new data showed consumer spending rose more than expected, easing fears of a possible recession. The Dow Jones Industrial Average rose 1.55 percent, or 205 points on Friday. Local investors are also relieved after the People's Bank of China cut the lending rate last week by a lower- than-expected 18 basis points. "The HSI rebounded on Friday as uncertainties surrounding the market cleared. I think the index can rise further and will close the year above 28,000," Yip said.
China will support more outbound investment by firms next year while also relaxing controls on investments in foreign capital markets by mainlanders. Speaking at a financial forum in Beijing, Lei Benhua, deputy head of the State Administration of Foreign Exchange, said the regulator will give residents will be given more freedom to invest overseas next year. Beijing has announced a series of measures to encourage capital outflows amid soaring domestic liquidity which is putting pressure on the yuan to appreciate faster as well as fueling inflation. Mainland residents can currently invest in overseas markets through selected domestic financial institutions under the qualified domestic institutional investor scheme.Last week, the China Banking Regulatory Commission said it is allowing Chinese banks to invest their clients' funds in the UK stock market.
SAN FRANCISCO - AMERICANS are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.
An analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.
Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.
'Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa,' said Mr Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. 'We're starting to see leaks now.'
The value of credit card accounts at least 30 days late jumped 26 per cent to US$17.3 billion (S$25.1 billion) in October from a year earlier at 17 large credit card trusts examined. That represented more than 4 per cent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.
At the same time, defaults - when lenders essentially give up hope of ever being repaid and write off the debt - rose 18 per cent to almost US$961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.
Serious delinquencies also are up sharply: Some of the nation's biggest lenders - including Advanta, GE Money Bank and HSBC - reported increases of 50 per cent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago.
Under analysis was data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors - similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 per cent of the US$920 billion the Federal Reserve counts as credit card debt owed by Americans.
Until recently, credit card default rates had been running close to record lows, providing one of the few profit growth areas for United States banks, which continue to flood Americans' mailboxes with billions of letters monthly offering easy sign-ups for new plastic.
Even after the recent spike in bad loans, the credit card business is still quite lucrative, thanks to interest rates that can run as high as 36 per cent, plus late fees and other penalties.
But what is coming into sharper focus from the detailed monthly SEC filings from the trusts is a snapshot of the worrisome state of Americans' ability to juggle growing and expensive credit card debt.
The trend carried into November. As of Friday, all of the trusts that filed reports for the month show increases in both delinquencies and defaults over November 2006, and many show sequential increases from October.
Discover accounts 30 days or more delinquent jumped 25,716 from November 2006 and had increased 6,000 between October and November this year.
Many economists expect delinquencies and defaults to rise further after the holiday shopping season.
Mr Mark Zandi, chief economist and co-founder of Moody's Economy.com, cited mounting mortgage problems that began after this summer's subprime financial shock as one of the culprits, as well as a weakening job market in the Midwest, South and parts of the West, where real-estate markets have been particularly hard hit.
'Credit card quality will continue to erode throughout next year,' Mr Zandi said.
Economists also cite America's long-standing attitude that debt - even high-interest credit card debt - is not a big deal.
'The desires of consumers to want, want, want, spend, spend, spend - it's the fabric of our nation,' said Mr Howard Dvorkin, founder of Consolidated Credit Counseling Services in Fort Lauderdale, Florida, which has advised more than 5 million people in debt. 'But you always have to pay the piper, and that can be a very painful process.'
Filing for bankruptcy is no longer a solution for many Americans because of a 2005 change to federal law that made it harder to walk away from debt. Those with above-average incomes are barred from declaring Chapter 7 - where debts can be wiped out entirely - except under special circumstances and must instead file a repayment plan under the more restrictive Chapter 13.
Personal finance coaches say the problem is most grave for individuals who are months delinquent or already in default - like Mr Kenneth McGuinness, a postal clerk from Flushing, New York.
His credit card struggles began nine years ago, when he charged his son's college tuition and books. He thought he was being clever: His credit card's 6 per cent 'teaser' interest rate was lower than the 8.6 per cent interest on a college loan.
Mr McGuinness, 61, soon began using Citibank and Chase cards for food, dental work and copays on doctor visits and minor surgeries.
Interest rates surged to 30 per cent. Now he's US$37,000 in debt and plans to file for bankruptcy in February.
'I tried to pay what I could and go after the high-interest accounts first,' he said. 'But it just kept getting higher and higher, and with late charges and surcharges I was going backward.'
In the wake of the jump in defaults on subprime mortgage loans made to borrowers with poor credit histories, banks have been less willing to allow consumers to consolidate credit card debt into home equity loans or refinanced mortgages. That is leaving some with no option but to miss payments, economists said.
Investors also are backing away from buying securitised credit-card debt, said Mr Moshe Orenbuch, managing director at Credit Suisse. But that probably has more to do with concerns about the overall health of the US economy, he said.
'It's been getting tougher to finance any kind of structured finance - mortgages, automobile loans, credit cards, student loans,' said Mr Orenbuch, who specialises in the credit industry. -- AP
Like the cavalry appearing over the brow of the hill, sovereign wealth funds have ridden to the rescue of the world's leading investment banks. Funds from China, Singapore and the Middle East have splashed out more than $30bn over the past few months, buying stakes in some of the best known names in the industry. Citigroup, Morgan Stanley, UBS, and Bear Stearns have all taken the foreign shilling. Last week it was the turn of Merrill Lynch to seek funds from Singapore 's Temasek.
At first glance, it all looks like a good deal. John Mack at Morgan Stanley gets an injection of $5bn from the Chinese Investment Corp, a fund set up and run by the government. In exchange, CIC gets just under a 10 per cent stake in the bank. Coming at a time when Morgan Stanley has just announced higher than expected writedowns of $9.4bn, largely related to sub-prime related assets, it's no wonder Mack turned to the Chinese - the queue of Western investors at his door was probably very short indeed. Aside from bolstering its balance sheet, the deal means Morgan Stanley has snared a strong ally to help its own expansion plans in China. The US bank already has a strong position there but is keen to expand in what is expected to become an increasingly lucrative market.
But is all this too good to be true? What are the chances that if Morgan Stanley hadn't racked up huge losses, it would have turned to the Chinese? In the case of Citigroup, the Abu Dhabi Investment Authority will be repaid handsomely for its $7.5bn cash injection in the form of a coupon that will deliver a fixed rate of 11 per cent. On top of that, the equity units it buys will convert, over the next five years, into an equity stake of 4.9 per cent in the US group.
Rather surprisingly, the creeping influence of sovereign wealth funds is an issue that has so far not raised the political temperature in Washington or London. Which politician would suggest a bank should go bust or shed jobs if a Middle-East or Chinese investor is proffering what seems to be a "get out of jail free" card?
At his year-end press conference last week, President Bush dismissed concerns over sovereign wealth funds taking stakes in US financial groups, noting that he was "fine" with capital coming in from overseas to help. It was a very different message from the protectionist sounds that were made at the time of Dubai Ports World's takeover of P&O in 2006.
Given the crisis among the world's financial institutions, it may not be an issue today but despite hailing from emerging markets, it is worth remembering that these state-run funds are not in the business of charitable giving. Just like every capitalist investor in the West, they are focused on eventually getting a return for their investment.
Kloppers risks being beached
While the rest of us are tucking into our turkey on Christmas Day, the heads of the world's miners will be enjoying the sunnier climes of South Africa. Industry insiders say Marius Kloppers, the head of BHP Billiton who is currently trying to land the world's biggest takeover, usually heads to Plettenberg Bay in the Western Cape. Brian Gilbertson, who held the same job a few years ago and attempted the same deal - to take over rival Rio Tinto - is also expected to make an appearance on the famous Golden Mile Beach.
Gilbertson's tilt at Rio was thwarted by BHP's chairman Don Argus, an intervention that prompted Gilbertson to leave the company. Argus is still chairman of BHP but has given his backing to the venture this time round. Perhaps Gilbertson can give Kloppers some advice on what to do next if he really wants his bid for Rio to succeed.
With Rio's shares still trading above Klopper's proposed three-for-one share offer, the message from investors is clear: BHP needs to pay up. Not only that, but the proposed deal has sparked deep concerns among the Chinese who fear that the creation of the world's dominant producer of iron ore will lead to inevitable pressure on the price they pay for the metal.
Kloppers wants a friendly deal with Tom Albanese, his counterpart at Rio. The latter's defence has so far been focused firmly on price, suggesting that even Rio can't argue against the strategic logic of the deal.
The Takeover Panel on Friday set BHP a deadline of February 6 to make a formal offer or walk away, giving Kloppers time to enjoy his barbecue on the beach. But if he really wants to get his hands on Rio he needs to dig a bit deeper into this pockets.
Bargain basement
The mood among some of Britain's most senior businessmen at a Sunday Telegraph lunch last week was rather gloomy. Fears over what the continuing fall-out from the credit crisis might bring, the ever-increasing regulatory burden from government and tough competition from emerging markets like China were all issues that were raised.
But despite these concerns, there was a feeling that there is an equal danger that people in Britain could talk themselves into a recession. Forecasting what will happen is a mug's game as every reporter knows, in particular when it comes to the stockmarket - although that doesn't prevent most of us from wheeling out reams of predictions at this time of year.
But since this is my last column for The Sunday Telegraph and since it's that time of year again, I thought I should suggest some tips of my own for the coming year. One of the consequences of the credit crunch is that shares of some of the world's best known companies are trading on price earnings multiples not seen for years- so low they suggest that some of these are in danger of going bust. Among the most bombed-out stocks are, unsurprisingly, the banks and the housebuilders.
The bottom five FTSE100 companies in terms of their price earnings ratios are Northern Rock (no surprise there), British Land, Liberty International, Hammerson and Resolution. Persimmon is number 12 from the bottom, while British Airways is number 18.
My top picks are GlaxoSmithKline, BP and Royal Bank of Scotland. Shares in GSK have been hit by regulatory concerns over some of its bestselling drugs and, at £12.82 are now lower than they were when the company was created in 2000. Its scientists have been working overtime to develop new medicines which should start driving the shares in the next few years.
Despite the record oil price, shares in BP have come under pressure as investors have fretted over outages to its production. These concerns should abate this coming year and with a dividend yield of 3.6 per cent, the shares still look cheap.
One of the cheapest stocks is Royal Bank of Scotland. Shares in the bank are trading on a price earnings ratio of 6 times, compared with the market's 13.4 times and yield an amazing 8.3 per cent. Fears the bank may have to raise some equity have so far prevented people from buying in, but the shares should be worth a look once its full-year results are out of the way early next year.
I am not predicting a huge rally in these companies' shares anytime soon, but if your time horizon is a medium-term one, I would be happy to take a punt on these three. Just as being a contrarian can pay off, every cloud - and perhaps every credit crunch - has a silver lining.
By Helen Power and Ben Harrington Last Updated: 11:29pm GMT 22/12/2007
China has begun concerted action to protect its position as one of the world's leading consumers of iron ore and other raw materials by launching a two-pronged initiative to gatecrash the £67bn bid battle being fought between BHP Billiton and rival mining group Rio Tinto.
The Chinese have approached Lehman Brothers, the investment bank, and are scouring the globe for other advisers in their efforts to affect the outcome of BHP's unsolicited takeover bid for Rio. No formal confirmation of Lehman's involvement has yet been made.
Chinese embassies in the UK and Australia have sounded out banking and legal advisers in London and Sydney over the past 10 days. Officials are drawing up detailed analysis of the BHP-Rio situation to assess all of China's political options.
At the same time three Chinese companies - Chinalco, Baosteel and China Development Bank, which already owns a 1pc stake in Rio Tinto - have taken the lead in examining ways of using the markets to scupper BHP's approach for Rio. These include talks with a wider circle of Chinese state-owned metals businesses, according to City sources.
The political and market-led interventions that China is considering include submissions to the UK and Australian competition authorities, a Chinese-backed white knight bid for Rio and a government-backed stake being acquired in Rio to block BHP's proposal.
A tie-up between BHP and Rio has serious implications for China, whose commodities-hungry economy is dependent on huge amounts of cheap raw materials to sustain its breakneck growth. A merged BHP-Rio would have market-leading positions in iron ore, aluminium, uranium, copper and coal and the power to impose much higher prices on consumers.
Banking sources said that the Chinese are also thought to have approached Brazilian mining group Vale, which is interested in Rio's aluminium business, to join their group.
Vale, which is already being advised by Lehman Brothers, has held talks with rival Xstrata about a potential tie-up between the two mining businesses.
BHP has held an initial round of negotiations with the Chinese about pricing guarantees and security of supply, but the two sides failed to reach an agreement and the Chinese remain extremely concerned about a BHP-Rio merger.
The deal has also attracted opposition from Japanese metal companies, and yesterday it was reported that the Japanese Fair Trade Commission has begun talks with counterparts in Europe and Australia about a possible investigation.
A merger would require clearance from competition regulators in the UK, the European Union and Australia and it is understood that the Chinese have interviewed leading City law firms about providing a regulatory defence.
Fighting the merger on competition grounds is less controversial than a white knight counterbid, which could face major political obstacles in the UK and Australia where governments would come under pressure to block a deal giving the Chinese control of crucial natural resources.
The third option of taking a blocking stake in Rio would also be easier than mounting a full counterbid. It is thought that BHP has yet to find investment banks willing to fund its merger offer, but any financing is almost certain to be contingent on the company winning over at least 90 per cent of Rio's shareholders. This means that the Chinese would need a stake of just 10 per cent to block the deal.
On Friday, the UK's Takeover Panel gave BHP until February 6 to mount a formal bid for Rio or walk away from for six months. BHP has so far proposed offering three BHP shares for every Rio share.
Small and medium enterprises in China are bracing for a tough new year as the government further tightens monetary policy to curb bank loans and implement new labor laws to improve social welfare. But SMEs claim both measures are pushing their businesses into severe hardship. "Operating costs are rising so fast on the raw material side," said Zhang Jianming, who owns electronic components manufacturing factories, employing more than 600 workers, in Jiangsu and Zhejiang. "At the same time, skilled and unskilled workers are demanding pay rises in line with inflation. But SMEs like us are facing even tougher conditions than our staff. Our operating costs are gradually outpacing the rise in gross margins. Soon net profit will be squeezed to zilch." Hong Kong-listed Nine Dragons Paper (2689) chairwoman Cheung Yan believes that the new labor laws are overprotecting staff, causing hardship to small and medium businesses. "The government is trying to mimic EU labor laws in an attempt to improve social welfare," she said. "But they've ignored the fact that the general education level of EU workers is way higher than that in China. Also I do not think the legal framework for labor insurance in China is at such a high level." Cheung said that the recent strike at their company was triggered by the new labor law, set to take effect January 1. "The recent sporadic strikes in the mainland were triggered by dual- pressure of inflation and new labor regulations. The labor laws have economic and social outcomes,"said Zhong Dajun, director of Beijing Dajun Economic Research Center.
The national pension fund earned more than 100 billion yuan of returns this year, buoyed by rising stock markets, the agency said over the weekend. The pension fund is expected to end this year with 500 billion yuan in assets, said Xiang Huaicheng, chairman of the National Council for Social Security Fund. "We've earned magnificent returns this year but everyone has," Mr Xiang said. "The market's been crazy." The CSI 300 Index, which tracks A shares listed on the mainland's two exchanges, has gained 150 per cent this year. Improved returns will help the pension fund extend coverage to more of the nation's 1.3 billion people as the average age of the population and the cost of funding retirement benefits both rise. However, concerns about the high value in the mainland markets prompted the National Social Security Fund (NSSF) to urge designated fund managers to pare down its holdings in mainland-listed firms to less than 70 per cent from 90 per cent, the Securities Times reported last month. According to Wind Information, a Shanghai financial data provider, the NSSF held shares in 137 mainland-listed firms on September 30, compared with 172 on June 30.
Beijing took a further step towards regulating state asset sales as the top legislature yesterday began deliberating a draft law that will prevent government-held shares being sold cheaply to foreign and public investors. The move suggests the central government is determined to weed out irregularities in state share transactions after the cabinet published similar rules in July. Shi Guangsheng, vice-chairman of the financial and economic committee of the National People's Congress, was quoted by Xinhua as saying that the enactment of the state-asset law was on the top of the legislature's agenda, sending a clear message to investors that the mainland will put up more restrictions to merger and acquisition deals related to state-owned companies. Mr Shi did not say whether the law will be passed at the 21st session of the 10th NPC standing committee which ends on December 29. Market watchers said the move was symbolic since several ministry-level authorities published rules in July, requiring listed companies to sell state stakes based on market price rather than book value. However, they agreed it was a sign that buyout deals on state companies would be restricted. "China will take a harsh stance on the sale of state assets because the NPC will provide a water-tight version of the legal framework," said Gong Zhenhua, a partner at Shanghai Ronghe Law Firm. "It also showed state leaders are taking this matter seriously."
China studying Unicom breakup, acquisition by China Telecom, Netcom
BEIJING (XFN-ASIA) - China's economic planning agency has proposed that fixed-line operators acquire China Unicom's assets, creating two entities with both mobile and fixed-line assets to challenge dominant cellular firm China Mobile, the official Shanghai Securities News reported.
According a report from the National Development and Reform Commission's research bureau, the acquisition of Unicom assets by fixed-line operators China Telecom and China Netcom (NYSE:CN) is the most efficient way to restructure the telecom industry.
After Unicom's assets are distributed, the acquirers can also introduce foreign investors and raise capital to better compete with China Mobile, the report said.
According to earlier reports, China Telecom is expected buy China Unicom's CDMA network in order to offer CDMA2000 third-generation mobile services when licenses are released. Meanwhile China Netcom will merge with China Unicom to co-develop WCDMA 3G services.
The report said to facilitate the rebalancing of the industry, the two fixed-line operators should obtain mobile licenses. China Mobile can then be granted a fixed-line license when conditions are 'right.' The report said China Mobile must not be broken up, even though it believes China Mobile's dominance has hindered the development of the telecom industry.
China Mobile reported nine months net profit of 59.88 bln yuan, exceeding the combined profit of the other three major operators.
China Telecom and China Netcom both reported fixed-line subscriber losses in November due to falling mobile telecom service fees.
Dec. 24 (Bloomberg) -- Temasek Holdings Pte, the biggest shareholder in Standard Chartered Plc, increased its stake in the U.K. bank by 1 percentage point to 18 percent, helping it boost banking investments in its $100 billion portfolio.
The Singapore sovereign wealth fund has been raising its stake in Standard Chartered since it first bought a 12 percent holding more than a year ago. Temasek bought 12 million shares to lift its stake to 253.7 million shares, the bank said in a filing on Dec. 21. The additional shares are worth 220 million pounds ($436 million) at that day’s closing price of 1,835 pence.
Set up in 1974 to run state assets, Temasek’s financial services investments now include India’s ICICI Bank Ltd. and Bank of China Ltd., as well as a controlling stake in DBS Group Holdings Ltd., Southeast Asia’s biggest bank. It may also invest $5 billion in Merrill Lynch & Co., the Wall Street Journal reported last week, citing unidentified people.
‘‘Most of Temasek’s investments in the banking sector are doing very well,’’ Teng Ngiek Lian, who manages $3 billion of Asian stocks as chief executive officer of Target Asset Management in Singapore, said in an interview today. ‘‘Standard Chartered is very well exposed to the emerging markets, which many view as very exciting.’’
‘Comfortable’ With Shareholding
The Singapore company first bought a stake in Standard Chartered from the estate of late Singapore hotelier Khoo Teck Puat in March 2006. Temasek held 13 percent of the bank as of March this year, according to its annual report.
‘‘We are comfortable with our current level of shareholding’’ in Standard Chartered, Simon Israel, executive director at Temasek, said in an e-mailed statement today. ‘‘As a financial investor, we are not involved in the bank’s board and management.’’
Israel didn’t comment on the Merrill report in today’s e- mail. The Journal said Dec. 21 the Singapore fund will invest in the world’s biggest brokerage through a cash infusion. Merrill announced $8.4 billion of writedowns on mortgage-related investments and corporate loans on Oct. 24, and then ousted Chief Executive Officer Stan O’Neal. The stock rose 1.9 percent on Dec. 21 following the report on Temasek’s investment.
Standard Chartered’s London-traded shares have risen 23 percent this year, the best amongst nine financial stocks in the FTSE All-Share Banks Index. Shares of the London-based bank that gets most of its profit from Asia rose 1.4 percent on Dec. 21.
The latest purchase puts Standard Chartered closer to being at risk of losing the ability to issue notes in Hong Kong. The city will bar lenders that are 20 percent owned by foreign governments from issuing bank notes denominated in the local currency, the Hong Kong Monetary Authority said in July.
Investments in financial services companies accounted for 38 percent of Temasek’s portfolio in the year ended March, compared with 35 percent a year earlier, making it the biggest industry for the company’s assets, according to its annual report.
For the past three years, China has been the financier that kept the American government well-funded. In 2004, it bought a fifth of the U.S. Treasury securities issued, a proportion that rose to 30 percent in 2005 and to 36 percent in 2006.
But according to U.S. government figures, in 2007 China has reversed course and become a net seller of Treasury securities. The U.S. Treasury said this week that China had $388 billion of Treasury bonds at the end of October, or $10 billion less than it had at the end of 2006.
Those sales of Treasuries, if the American estimates are correct, have come during a year when the dollar has been weak against most currencies, and would be consistent with China diversifying its investments into other currencies.
But the figures may be misleading.
For one thing, other Treasury estimates show that the Chinese are still increasing their holdings of bonds issued by American agencies, like Freddie Mac and Fannie Mae, and by American companies. But even including those purchases, the rate of increase of Chinese holdings of dollar-based securities seems to have eased off.
The other problem is that the Treasury has a history of getting these numbers wrong, and then fixing them up many months later.
The initial estimates are based on reports of transactions in securities, and those involving long-term securities, like Treasury bonds and notes, reflect only the initial buyer. So if China bought Treasury securities through a financial intermediary in Britain or Hong Kong, the sale might be attributed to those areas.
Each June, the Treasury does a survey of actual holdings, and revises its previous estimates. The survey from June 2007 will be incorporated in the data in February. A year earlier, the June 2006 figure was revised up by $62 billion, and a similar revision could come this year.
If so, that would reduce but not erase the trend toward China owning fewer Treasury securities. That country is running a huge trade surplus that brings in billions of dollars each month, and its options are limited.
It may need to buy a large amount of dollar-denominated investments to keep the Chinese currency from rising too far against the dollar, but those investments do not have to be Treasuries.
This week China invested $5 billion in Morgan Stanley, an investment bank that needed to raise capital.
Over all, foreigners continue to finance the American government deficit, with their Treasury holdings rising $194.7 billion during the first 10 months of the year, more than the $166 billion increase in the amount of Treasury securities held by the public.
Since January 2001, when President George W. Bush took office, the amount of debt issued to the public has risen by $1.7 trillion, with $1.3 trillion of that increase being taken by foreigners, according to the Treasury estimates.
Of that, the increase for China was $327 billion, about a fourth of the foreign total.
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China's decision to raise lending rates by a smaller amount than deposit rates indicated the authorities are cautious not to over-tighten the economy amid uncertainty surrounding the global economic growth and financial markets, economists say. "The fact that they only raised the one-year lending rates by 18 basis points suggests that it is not a very aggressive change in policy," said Peter Morgan, chief Asia-Pacific economist at Hongkong and Shanghai Banking Corp. "It seems like that they are still focusing more on quantitative tightening measures like increasing reserve requirement ratio, which are less effective than raising interest rates [in tightening the economy]." On Thursday, the People's Bank of China raised the one-year lending rate by 18 basis points to 7.47 percent and the one-year savings rate by 27 basis points, along with other rate hikes in various degrees. Earlier this month, China' top leaders said they would shift from "prudent" to "tighter" monetary policies next year to prevent economic overheating and suppress inflation, which had raised hopes that Beijing will intensify its tightening efforts. "The modest increase in lending rates suggests a limited scope to use interest rates to cool down the economy, as PBOC clearly does not want to over- tighten and make borrowers suffer," wrote JPMorgan analysts in a research note. Goldman Sachs and Lehman Brothers said they are not expecting further interest
The Chinese government will restrict total lending of commercial banks to grow not more than 15 percent next year. Banks should also make loans according to quarterly targets, a mainland newspaper reported yesterday. A limit for the total amount of loans to be made in one year will be determined by government authorities, while individual banks will be allocated quarterly quotas. The news came after the central bank raised interest rates for the sixth time this year on Thursday. Shanghai Securities News quoted a source as saying 35 percent of the yearly lending quota can be used in the first quarter, 30 percent in the second, 25 percent in the third and 10 percent in the fourth. Commercial banks in the mainland made about half of their loans in the first quarter this year, and banks need to reduce lending by 15 percent to meet the 35 percent ceiling in the same period next year. "Under the yearly loan quota, [banks] need to state clearly the proportion of loans made in each quarter," said a source involved with bank management, adding that government authorities had already required banks to finish next year's lending timetable.
Analysts expect the Hang Seng Index to end the year above the 28,000 level as it takes its cue from the stabilizing US market. "The market should remain strong mainly because of more favorable overseas markets. There will also be more window-dressing activities by fund managers as we near the end of the year," said Ben Kwong Man-bun, chief operating officer of KGI Asia. On Friday, the Hang Seng Index climbed 609.83 points or 2.3 percent to close at 27,626.92, led by property plays, on a thin trading volume of HK$83.4 billion. Kwong said trading volume will remain weak ahead of the holidays. "We have a long holiday coming up, so market activity will be ... dominated by window dressing," Kwong added.
The Hong Kong market will be open for the morning session only today, before closing for two days over the Christmas holidays. New Year's Eve next Monday will also be a half day. First Shanghai Securities strategist Linus Yip Sheung-chi said a rally in Wall Street on Friday showed that the US market has stabilized for now - a relief for investors. US stocks surged after new data showed consumer spending rose more than expected, easing fears of a possible recession. The Dow Jones Industrial Average rose 1.55 percent, or 205 points on Friday. Local investors are also relieved after the People's Bank of China cut the lending rate last week by a lower- than-expected 18 basis points. "The HSI rebounded on Friday as uncertainties surrounding the market cleared. I think the index can rise further and will close the year above 28,000," Yip said.
Newly listed HK IPO: BYD Electronic （0285.HK） Vs Foxconn Intl Hldgs（2038.HK）
2007-12-24
曾淵滄：比亞電子具諾基亞概念
這一浪我臨時變陣，從若恒指跌破26000點之後減持改為跌不破26000點博雙底反彈，至今反彈幅度還不錯，特別是本地地產股，長實（001）、新世界發展（017）皆有8%的反彈。今年我自己認為最成功的一次變陣是今年中恒指由23000急跌，當時我打算在恒指跌破18400點後撤退，但當恒指在19500點站穩呈V形反彈後就反手追貨，結果那一浪恒指直升上32000點。主要支持線是很考驗EQ的，跌破主要支持線要撤退，跌不破而反彈要追貨，心理上從極悲觀轉為樂觀是不容易的。前幾天，一位朋友寄來一張聖誕卡，卡內有一行字，內容是希望我除了舉辦投資講座外，也應該舉辦「心理輔導」講座，培訓EQ以應付大上大落的股市。比亞電子（285）只是一隻二三線電子股，規模不大，上市認購申請嚴重不足，僅4成認購。上市前，市場連暗盤價也沒有，所有的報章都說申請者一定倒楣，股價必跌破上市價。可是，奇地，上市後股價不但不下跌，第一天上升2%。第二天再上升15%，上星期五我在本欄已經提到，嚴重認購不足的股反而可以用來炒供求不平衡，只要包銷商有魄力當「莊家」就行。
認購不足造就炒供求
當然，要炒起一隻股，除了炒供求之外，也許還需要一些概念。比亞電子是有些概念的，這家企業最大的賣點是兩年前取得全球最大手機品牌「諾基亞」的量產定單，這使到比亞於2006年的利潤急升11倍。2004年與2005年，比亞電子每股盈利僅0.02元，2006年就跳升至0.24元，2007年估計為0.5元。目前為止，比亞電子所取得的諾基亞定單與另一藍籌電子企業富士康（2038）當然還是沒得比。但是，比亞電子能打入諾基亞，取得零的突破，表示其生產質量水平已達到諾基亞的要求，將來極可能會逐漸蠶食富士康的市場佔有額，這對富士康而言是心腹大患，難怪比亞電子上市前，富士康先下手將比亞告上法院。因為有諾基亞的概念，我本來打算等上市後，股價因認購不足而大跌才入市買便宜貨，卻沒想到會出現炒供求不平衡，如果你有膽的話，倒可以試一試賭一賭。
China will support more outbound investment by firms next year while also relaxing controls on investments in foreign capital markets by mainlanders. Speaking at a financial forum in Beijing, Lei Benhua, deputy head of the State Administration of Foreign Exchange, said the regulator will give residents will be given more freedom to invest overseas next year. Beijing has announced a series of measures to encourage capital outflows amid soaring domestic liquidity which is putting pressure on the yuan to appreciate faster as well as fueling inflation. Mainland residents can currently invest in overseas markets through selected domestic financial institutions under the qualified domestic institutional investor scheme.Last week, the China Banking Regulatory Commission said it is allowing Chinese banks to invest their clients' funds in the UK stock market.
Americans' unpaid credit card bills rising
SAN FRANCISCO - AMERICANS are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.
An analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.
Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.
'Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa,' said Mr Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. 'We're starting to see leaks now.'
The value of credit card accounts at least 30 days late jumped 26 per cent to US$17.3 billion (S$25.1 billion) in October from a year earlier at 17 large credit card trusts examined. That represented more than 4 per cent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.
At the same time, defaults - when lenders essentially give up hope of ever being repaid and write off the debt - rose 18 per cent to almost US$961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.
Serious delinquencies also are up sharply: Some of the nation's biggest lenders - including Advanta, GE Money Bank and HSBC - reported increases of 50 per cent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago.
Under analysis was data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors - similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 per cent of the US$920 billion the Federal Reserve counts as credit card debt owed by Americans.
Until recently, credit card default rates had been running close to record lows, providing one of the few profit growth areas for United States banks, which continue to flood Americans' mailboxes with billions of letters monthly offering easy sign-ups for new plastic.
Even after the recent spike in bad loans, the credit card business is still quite lucrative, thanks to interest rates that can run as high as 36 per cent, plus late fees and other penalties.
But what is coming into sharper focus from the detailed monthly SEC filings from the trusts is a snapshot of the worrisome state of Americans' ability to juggle growing and expensive credit card debt.
The trend carried into November. As of Friday, all of the trusts that filed reports for the month show increases in both delinquencies and defaults over November 2006, and many show sequential increases from October.
Discover accounts 30 days or more delinquent jumped 25,716 from November 2006 and had increased 6,000 between October and November this year.
Many economists expect delinquencies and defaults to rise further after the holiday shopping season.
Mr Mark Zandi, chief economist and co-founder of Moody's Economy.com, cited mounting mortgage problems that began after this summer's subprime financial shock as one of the culprits, as well as a weakening job market in the Midwest, South and parts of the West, where real-estate markets have been particularly hard hit.
'Credit card quality will continue to erode throughout next year,' Mr Zandi said.
Economists also cite America's long-standing attitude that debt - even high-interest credit card debt - is not a big deal.
'The desires of consumers to want, want, want, spend, spend, spend - it's the fabric of our nation,' said Mr Howard Dvorkin, founder of Consolidated Credit Counseling Services in Fort Lauderdale, Florida, which has advised more than 5 million people in debt. 'But you always have to pay the piper, and that can be a very painful process.'
Filing for bankruptcy is no longer a solution for many Americans because of a 2005 change to federal law that made it harder to walk away from debt. Those with above-average incomes are barred from declaring Chapter 7 - where debts can be wiped out entirely - except under special circumstances and must instead file a repayment plan under the more restrictive Chapter 13.
Personal finance coaches say the problem is most grave for individuals who are months delinquent or already in default - like Mr Kenneth McGuinness, a postal clerk from Flushing, New York.
His credit card struggles began nine years ago, when he charged his son's college tuition and books. He thought he was being clever: His credit card's 6 per cent 'teaser' interest rate was lower than the 8.6 per cent interest on a college loan.
Mr McGuinness, 61, soon began using Citibank and Chase cards for food, dental work and copays on doctor visits and minor surgeries.
Interest rates surged to 30 per cent. Now he's US$37,000 in debt and plans to file for bankruptcy in February.
'I tried to pay what I could and go after the high-interest accounts first,' he said. 'But it just kept getting higher and higher, and with late charges and surcharges I was going backward.'
In the wake of the jump in defaults on subprime mortgage loans made to borrowers with poor credit histories, banks have been less willing to allow consumers to consolidate credit card debt into home equity loans or refinanced mortgages. That is leaving some with no option but to miss payments, economists said.
Investors also are backing away from buying securitised credit-card debt, said Mr Moshe Orenbuch, managing director at Credit Suisse. But that probably has more to do with concerns about the overall health of the US economy, he said.
'It's been getting tougher to finance any kind of structured finance - mortgages, automobile loans, credit cards, student loans,' said Mr Orenbuch, who specialises in the credit industry. -- AP
Sovereign wealth funds: cavalry or Calvary?
By Sylvia Pfeifer, Deputy Business Editor
Last Updated: 11:28pm GMT 22/12/2007
Like the cavalry appearing over the brow of the hill, sovereign wealth funds have ridden to the rescue of the world's leading investment banks. Funds from China, Singapore and the Middle East have splashed out more than $30bn over the past few months, buying stakes in some of the best known names in the industry. Citigroup, Morgan Stanley, UBS, and Bear Stearns have all taken the foreign shilling. Last week it was the turn of Merrill Lynch to seek funds from Singapore 's Temasek.
At first glance, it all looks like a good deal. John Mack at Morgan Stanley gets an injection of $5bn from the Chinese Investment Corp, a fund set up and run by the government. In exchange, CIC gets just under a 10 per cent stake in the bank. Coming at a time when Morgan Stanley has just announced higher than expected writedowns of $9.4bn, largely related to sub-prime related assets, it's no wonder Mack turned to the Chinese - the queue of Western investors at his door was probably very short indeed. Aside from bolstering its balance sheet, the deal means Morgan Stanley has snared a strong ally to help its own expansion plans in China. The US bank already has a strong position there but is keen to expand in what is expected to become an increasingly lucrative market.
But is all this too good to be true? What are the chances that if Morgan Stanley hadn't racked up huge losses, it would have turned to the Chinese? In the case of Citigroup, the Abu Dhabi Investment Authority will be repaid handsomely for its $7.5bn cash injection in the form of a coupon that will deliver a fixed rate of 11 per cent. On top of that, the equity units it buys will convert, over the next five years, into an equity stake of 4.9 per cent in the US group.
Rather surprisingly, the creeping influence of sovereign wealth funds is an issue that has so far not raised the political temperature in Washington or London. Which politician would suggest a bank should go bust or shed jobs if a Middle-East or Chinese investor is proffering what seems to be a "get out of jail free" card?
At his year-end press conference last week, President Bush dismissed concerns over sovereign wealth funds taking stakes in US financial groups, noting that he was "fine" with capital coming in from overseas to help. It was a very different message from the protectionist sounds that were made at the time of Dubai Ports World's takeover of P&O in 2006.
Given the crisis among the world's financial institutions, it may not be an issue today but despite hailing from emerging markets, it is worth remembering that these state-run funds are not in the business of charitable giving. Just like every capitalist investor in the West, they are focused on eventually getting a return for their investment.
Kloppers risks being beached
While the rest of us are tucking into our turkey on Christmas Day, the heads of the world's miners will be enjoying the sunnier climes of South Africa. Industry insiders say Marius Kloppers, the head of BHP Billiton who is currently trying to land the world's biggest takeover, usually heads to Plettenberg Bay in the Western Cape. Brian Gilbertson, who held the same job a few years ago and attempted the same deal - to take over rival Rio Tinto - is also expected to make an appearance on the famous Golden Mile Beach.
Gilbertson's tilt at Rio was thwarted by BHP's chairman Don Argus, an intervention that prompted Gilbertson to leave the company. Argus is still chairman of BHP but has given his backing to the venture this time round. Perhaps Gilbertson can give Kloppers some advice on what to do next if he really wants his bid for Rio to succeed.
With Rio's shares still trading above Klopper's proposed three-for-one share offer, the message from investors is clear: BHP needs to pay up. Not only that, but the proposed deal has sparked deep concerns among the Chinese who fear that the creation of the world's dominant producer of iron ore will lead to inevitable pressure on the price they pay for the metal.
Kloppers wants a friendly deal with Tom Albanese, his counterpart at Rio. The latter's defence has so far been focused firmly on price, suggesting that even Rio can't argue against the strategic logic of the deal.
The Takeover Panel on Friday set BHP a deadline of February 6 to make a formal offer or walk away, giving Kloppers time to enjoy his barbecue on the beach. But if he really wants to get his hands on Rio he needs to dig a bit deeper into this pockets.
Bargain basement
The mood among some of Britain's most senior businessmen at a Sunday Telegraph lunch last week was rather gloomy. Fears over what the continuing fall-out from the credit crisis might bring, the ever-increasing regulatory burden from government and tough competition from emerging markets like China were all issues that were raised.
But despite these concerns, there was a feeling that there is an equal danger that people in Britain could talk themselves into a recession. Forecasting what will happen is a mug's game as every reporter knows, in particular when it comes to the stockmarket - although that doesn't prevent most of us from wheeling out reams of predictions at this time of year.
But since this is my last column for The Sunday Telegraph and since it's that time of year again, I thought I should suggest some tips of my own for the coming year. One of the consequences of the credit crunch is that shares of some of the world's best known companies are trading on price earnings multiples not seen for years- so low they suggest that some of these are in danger of going bust. Among the most bombed-out stocks are, unsurprisingly, the banks and the housebuilders.
The bottom five FTSE100 companies in terms of their price earnings ratios are Northern Rock (no surprise there), British Land, Liberty International, Hammerson and Resolution. Persimmon is number 12 from the bottom, while British Airways is number 18.
My top picks are GlaxoSmithKline, BP and Royal Bank of Scotland. Shares in GSK have been hit by regulatory concerns over some of its bestselling drugs and, at £12.82 are now lower than they were when the company was created in 2000. Its scientists have been working overtime to develop new medicines which should start driving the shares in the next few years.
Despite the record oil price, shares in BP have come under pressure as investors have fretted over outages to its production. These concerns should abate this coming year and with a dividend yield of 3.6 per cent, the shares still look cheap.
One of the cheapest stocks is Royal Bank of Scotland. Shares in the bank are trading on a price earnings ratio of 6 times, compared with the market's 13.4 times and yield an amazing 8.3 per cent. Fears the bank may have to raise some equity have so far prevented people from buying in, but the shares should be worth a look once its full-year results are out of the way early next year.
I am not predicting a huge rally in these companies' shares anytime soon, but if your time horizon is a medium-term one, I would be happy to take a punt on these three. Just as being a contrarian can pay off, every cloud - and perhaps every credit crunch - has a silver lining.
Merry Christmas.
China puts embassies on Rio bid alert
By Helen Power and Ben Harrington
Last Updated: 11:29pm GMT 22/12/2007
China has begun concerted action to protect its position as one of the world's leading consumers of iron ore and other raw materials by launching a two-pronged initiative to gatecrash the £67bn bid battle being fought between BHP Billiton and rival mining group Rio Tinto.
The Chinese have approached Lehman Brothers, the investment bank, and are scouring the globe for other advisers in their efforts to affect the outcome of BHP's unsolicited takeover bid for Rio. No formal confirmation of Lehman's involvement has yet been made.
Chinese embassies in the UK and Australia have sounded out banking and legal advisers in London and Sydney over the past 10 days. Officials are drawing up detailed analysis of the BHP-Rio situation to assess all of China's political options.
At the same time three Chinese companies - Chinalco, Baosteel and China Development Bank, which already owns a 1pc stake in Rio Tinto - have taken the lead in examining ways of using the markets to scupper BHP's approach for Rio. These include talks with a wider circle of Chinese state-owned metals businesses, according to City sources.
The political and market-led interventions that China is considering include submissions to the UK and Australian competition authorities, a Chinese-backed white knight bid for Rio and a government-backed stake being acquired in Rio to block BHP's proposal.
A tie-up between BHP and Rio has serious implications for China, whose commodities-hungry economy is dependent on huge amounts of cheap raw materials to sustain its breakneck growth. A merged BHP-Rio would have market-leading positions in iron ore, aluminium, uranium, copper and coal and the power to impose much higher prices on consumers.
Banking sources said that the Chinese are also thought to have approached Brazilian mining group Vale, which is interested in Rio's aluminium business, to join their group.
Vale, which is already being advised by Lehman Brothers, has held talks with rival Xstrata about a potential tie-up between the two mining businesses.
BHP has held an initial round of negotiations with the Chinese about pricing guarantees and security of supply, but the two sides failed to reach an agreement and the Chinese remain extremely concerned about a BHP-Rio merger.
The deal has also attracted opposition from Japanese metal companies, and yesterday it was reported that the Japanese Fair Trade Commission has begun talks with counterparts in Europe and Australia about a possible investigation.
A merger would require clearance from competition regulators in the UK, the European Union and Australia and it is understood that the Chinese have interviewed leading City law firms about providing a regulatory defence.
Fighting the merger on competition grounds is less controversial than a white knight counterbid, which could face major political obstacles in the UK and Australia where governments would come under pressure to block a deal giving the Chinese control of crucial natural resources.
The third option of taking a blocking stake in Rio would also be easier than mounting a full counterbid. It is thought that BHP has yet to find investment banks willing to fund its merger offer, but any financing is almost certain to be contingent on the company winning over at least 90 per cent of Rio's shareholders. This means that the Chinese would need a stake of just 10 per cent to block the deal.
On Friday, the UK's Takeover Panel gave BHP until February 6 to mount a formal bid for Rio or walk away from for six months. BHP has so far proposed offering three BHP shares for every Rio share.
Small and medium enterprises in China are bracing for a tough new year as the government further tightens monetary policy to curb bank loans and implement new labor laws to improve social welfare. But SMEs claim both measures are pushing their businesses into severe hardship. "Operating costs are rising so fast on the raw material side," said Zhang Jianming, who owns electronic components manufacturing factories, employing more than 600 workers, in Jiangsu and Zhejiang. "At the same time, skilled and unskilled workers are demanding pay rises in line with inflation. But SMEs like us are facing even tougher conditions than our staff. Our operating costs are gradually outpacing the rise in gross margins. Soon net profit will be squeezed to zilch." Hong Kong-listed Nine Dragons Paper (2689) chairwoman Cheung Yan believes that the new labor laws are overprotecting staff, causing hardship to small and medium businesses. "The government is trying to mimic EU labor laws in an attempt to improve social welfare," she said. "But they've ignored the fact that the general education level of EU workers is way higher than that in China. Also I do not think the legal framework for labor insurance in China is at such a high level." Cheung said that the recent strike at their company was triggered by the new labor law, set to take effect January 1. "The recent sporadic strikes in the mainland were triggered by dual- pressure of inflation and new labor regulations. The labor laws have economic and social outcomes,"said Zhong Dajun, director of Beijing Dajun Economic Research Center.
The national pension fund earned more than 100 billion yuan of returns this year, buoyed by rising stock markets, the agency said over the weekend. The pension fund is expected to end this year with 500 billion yuan in assets, said Xiang Huaicheng, chairman of the National Council for Social Security Fund. "We've earned magnificent returns this year but everyone has," Mr Xiang said. "The market's been crazy." The CSI 300 Index, which tracks A shares listed on the mainland's two exchanges, has gained 150 per cent this year. Improved returns will help the pension fund extend coverage to more of the nation's 1.3 billion people as the average age of the population and the cost of funding retirement benefits both rise. However, concerns about the high value in the mainland markets prompted the National Social Security Fund (NSSF) to urge designated fund managers to pare down its holdings in mainland-listed firms to less than 70 per cent from 90 per cent, the Securities Times reported last month. According to Wind Information, a Shanghai financial data provider, the NSSF held shares in 137 mainland-listed firms on September 30, compared with 172 on June 30.
Beijing took a further step towards regulating state asset sales as the top legislature yesterday began deliberating a draft law that will prevent government-held shares being sold cheaply to foreign and public investors. The move suggests the central government is determined to weed out irregularities in state share transactions after the cabinet published similar rules in July. Shi Guangsheng, vice-chairman of the financial and economic committee of the National People's Congress, was quoted by Xinhua as saying that the enactment of the state-asset law was on the top of the legislature's agenda, sending a clear message to investors that the mainland will put up more restrictions to merger and acquisition deals related to state-owned companies. Mr Shi did not say whether the law will be passed at the 21st session of the 10th NPC standing committee which ends on December 29. Market watchers said the move was symbolic since several ministry-level authorities published rules in July, requiring listed companies to sell state stakes based on market price rather than book value. However, they agreed it was a sign that buyout deals on state companies would be restricted. "China will take a harsh stance on the sale of state assets because the NPC will provide a water-tight version of the legal framework," said Gong Zhenhua, a partner at Shanghai Ronghe Law Firm. "It also showed state leaders are taking this matter seriously."
中鋁完成對雲銅集團注資
2007年12月24日
北京《中國證券報》報道, 中鋁已經完成向雲銅集團注資75億人民幣。 中鋁8月份與雲銅集團簽約, 收購後者49%股份。交易完成後, 中鋁成為雲銅集團最大股東。此外, 根據雙方當時達成的戰略合作協議, 在08年7月份之前, 中鋁公司還將斥資20億元, 在雲南發展銅深加工項目。 報道引用雲銅集團有關負責人的話指出, 此次增資擴股後, 雲銅集團的總資產由350億元增加到425億元, 淨資產從109.47億元增加到184.47億元, 其中國有淨資產從58.47億元增加到133.47億元。 中鋁是中國最大鋁業公司, 擁有上市附屬中國鋁業(SHA 601600 2600.HK); 雲銅集團擁有上市附屬雲南銅業(SZA 000878)。
Aluminum Corp. of China Ltd.(ACH)US$51.97 +1.82 (↑3.63%), Chalco (2600.HK)HK$16.60 +0.82(↑5.20%)
China studying Unicom breakup, acquisition by China Telecom, Netcom
BEIJING (XFN-ASIA) - China's economic planning agency has proposed that fixed-line operators acquire China Unicom's assets, creating two entities with both mobile and fixed-line assets to challenge dominant cellular firm China Mobile, the official Shanghai Securities News reported.
According a report from the National Development and Reform Commission's research bureau, the acquisition of Unicom assets by fixed-line operators China Telecom and China Netcom (NYSE:CN) is the most efficient way to restructure the telecom industry.
After Unicom's assets are distributed, the acquirers can also introduce foreign investors and raise capital to better compete with China Mobile, the report said.
According to earlier reports, China Telecom is expected buy China Unicom's CDMA network in order to offer CDMA2000 third-generation mobile services when licenses are released. Meanwhile China Netcom will merge with China Unicom to co-develop WCDMA 3G services.
The report said to facilitate the rebalancing of the industry, the two fixed-line operators should obtain mobile licenses. China Mobile can then be granted a fixed-line license when conditions are 'right.'
The report said China Mobile must not be broken up, even though it believes China Mobile's dominance has hindered the development of the telecom industry.
China Mobile reported nine months net profit of 59.88 bln yuan, exceeding the combined profit of the other three major operators.
China Telecom and China Netcom both reported fixed-line subscriber losses in November due to falling mobile telecom service fees.
Temasek Raises Stake in Standard Chartered to 18%
Dec. 24 (Bloomberg) -- Temasek Holdings Pte, the biggest shareholder in Standard Chartered Plc, increased its stake in the U.K. bank by 1 percentage point to 18 percent, helping it boost banking investments in its $100 billion portfolio.
The Singapore sovereign wealth fund has been raising its stake in Standard Chartered since it first bought a 12 percent holding more than a year ago. Temasek bought 12 million shares to lift its stake to 253.7 million shares, the bank said in a filing on Dec. 21. The additional shares are worth 220 million pounds ($436 million) at that day’s closing price of 1,835 pence.
Set up in 1974 to run state assets, Temasek’s financial services investments now include India’s ICICI Bank Ltd. and Bank of China Ltd., as well as a controlling stake in DBS Group Holdings Ltd., Southeast Asia’s biggest bank. It may also invest $5 billion in Merrill Lynch & Co., the Wall Street Journal reported last week, citing unidentified people.
‘‘Most of Temasek’s investments in the banking sector are doing very well,’’ Teng Ngiek Lian, who manages $3 billion of Asian stocks as chief executive officer of Target Asset Management in Singapore, said in an interview today. ‘‘Standard Chartered is very well exposed to the emerging markets, which many view as very exciting.’’
‘Comfortable’ With Shareholding
The Singapore company first bought a stake in Standard Chartered from the estate of late Singapore hotelier Khoo Teck Puat in March 2006. Temasek held 13 percent of the bank as of March this year, according to its annual report.
‘‘We are comfortable with our current level of shareholding’’ in Standard Chartered, Simon Israel, executive director at Temasek, said in an e-mailed statement today. ‘‘As a financial investor, we are not involved in the bank’s board and management.’’
Israel didn’t comment on the Merrill report in today’s e- mail. The Journal said Dec. 21 the Singapore fund will invest in the world’s biggest brokerage through a cash infusion. Merrill announced $8.4 billion of writedowns on mortgage-related investments and corporate loans on Oct. 24, and then ousted Chief Executive Officer Stan O’Neal. The stock rose 1.9 percent on Dec. 21 following the report on Temasek’s investment.
Standard Chartered’s London-traded shares have risen 23 percent this year, the best amongst nine financial stocks in the FTSE All-Share Banks Index. Shares of the London-based bank that gets most of its profit from Asia rose 1.4 percent on Dec. 21.
The latest purchase puts Standard Chartered closer to being at risk of losing the ability to issue notes in Hong Kong. The city will bar lenders that are 20 percent owned by foreign governments from issuing bank notes denominated in the local currency, the Hong Kong Monetary Authority said in July.
Investments in financial services companies accounted for 38 percent of Temasek’s portfolio in the year ended March, compared with 35 percent a year earlier, making it the biggest industry for the company’s assets, according to its annual report.
For the past three years, China has been the financier that kept the American government well-funded. In 2004, it bought a fifth of the U.S. Treasury securities issued, a proportion that rose to 30 percent in 2005 and to 36 percent in 2006.
But according to U.S. government figures, in 2007 China has reversed course and become a net seller of Treasury securities. The U.S. Treasury said this week that China had $388 billion of Treasury bonds at the end of October, or $10 billion less than it had at the end of 2006.
Those sales of Treasuries, if the American estimates are correct, have come during a year when the dollar has been weak against most currencies, and would be consistent with China diversifying its investments into other currencies.
But the figures may be misleading.
For one thing, other Treasury estimates show that the Chinese are still increasing their holdings of bonds issued by American agencies, like Freddie Mac and Fannie Mae, and by American companies. But even including those purchases, the rate of increase of Chinese holdings of dollar-based securities seems to have eased off.
The other problem is that the Treasury has a history of getting these numbers wrong, and then fixing them up many months later.
The initial estimates are based on reports of transactions in securities, and those involving long-term securities, like Treasury bonds and notes, reflect only the initial buyer. So if China bought Treasury securities through a financial intermediary in Britain or Hong Kong, the sale might be attributed to those areas.
Each June, the Treasury does a survey of actual holdings, and revises its previous estimates. The survey from June 2007 will be incorporated in the data in February. A year earlier, the June 2006 figure was revised up by $62 billion, and a similar revision could come this year.
If so, that would reduce but not erase the trend toward China owning fewer Treasury securities. That country is running a huge trade surplus that brings in billions of dollars each month, and its options are limited.
It may need to buy a large amount of dollar-denominated investments to keep the Chinese currency from rising too far against the dollar, but those investments do not have to be Treasuries.
This week China invested $5 billion in Morgan Stanley, an investment bank that needed to raise capital.
Over all, foreigners continue to finance the American government deficit, with their Treasury holdings rising $194.7 billion during the first 10 months of the year, more than the $166 billion increase in the amount of Treasury securities held by the public.
Since January 2001, when President George W. Bush took office, the amount of debt issued to the public has risen by $1.7 trillion, with $1.3 trillion of that increase being taken by foreigners, according to the Treasury estimates.
Of that, the increase for China was $327 billion, about a fourth of the foreign total.
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